Well folks, it’s been quite the ride for markets and after yesterday’s performance, it's looking like it will go either way - especially given the slew of less-than-positive news that hit the scene yesterday focusing on updates to the war as well as some treasury trouble in Japan. Anyways, read on for your daily in-depth CR scoop on all these stories and a long trade recommendation on $LBRT. Also - this just in, UK Prime Minister Liz Truss has just resigned from office only 44 days into her term.
Markets in Review
Likely on news of the UK PM’s resignation, markets have performed a price reversal in the pre-market with the Dow only up a couple of bps while the S&P and Nasdaq are 18 and 38 bps into negative territory at the time of writing. Despite the market’s bounce over the last couple of days and oil’s come-down from higher levels, new investor sentiment figures actually pin a larger share of participants in the bearish camp than before, about 56.2%. This comes as the S&P is still trading at a slightly frothy p/e of 20 and there’s now a 97.1% probability of a 75bp hike at the November 2nd FOMC meeting in 2 weeks.
Long: Liberty Energy Inc. (LBRT-NYSE) | Timeline: 2 days
Liberty Energy Inc. (LBRT), which provides hydraulic fracturing services to onshore oil and natural gas exploration and production companies in North America, announced stellar earnings yesterday after the market closed. The company beat earnings and revenue estimates by 28.45% and 12.46%, respectively, as oil and gas markets remained tight in the third quarter. (Full Story) Referring to the chart, LBRT has had a relatively good year, but after a massive jump back in April, a downward resistance level developed, squeezing the price back down to its 200-day MA. That said, after a great performance report in a hot oil market, shares jumped above resistance carrying plenty of momentum into today and tomorrow, supported by an extremely bullish MACD - a popularized indicator utilizing the 12-day and 26-day moving averages.
BOJ Announces Emergency Bond Buying Program
As we mentioned back in May (Report), the yield cap of 0.25% imposed on the 10-year JGB (Japanese Government Bond) by Japan’s Central Bank is unfathomably capital intensive, and as a result, is unsustainable. Since our May publication, the Yen has fallen by close to 14% as bond buying has continued. On Thursday this thesis of unsustainability was further proven when the 10-year yield momentarily reached 0.255%. As a result of that jump, an unscheduled bond-buying program has begun, on top of the BOJ’s previous pledge to purchase an unlimited amount of 10-year bonds at 0.25%. While these programs may be seen as necessary now, they may prove disastrous to the value of the Yen as the US FED continues to hike rates. Erdogan Announces Gas Hub With Russian Backing On Wednesday, the Turkish President announced that he and Vladimir Putin agreed to create a natural gas hub within Turkey with the intention of supplying Europe. This is a break from NATO’s current stance on doing business with Russia, while sensitivity to the announcement is being exacerbated by the Nord Stream sabotage. While somewhat shocking, this type of move has been seen recently with the acquisition of the Russian-made S-400 air defense system alongside attempts to block Sweden and Finland from joining the alliance. Turkey has always been seen as the black sheep of the organization, however, this development casts serious doubt about Turkish commitment to NATO’s stance against Russian military action and their commitment to the alliance as a whole.
Russians Strike Ukrainian Electricity Infrastructure
On the night of 18-19 October, the Russian military attacked Enerhodar, a satellite city of the Zaporizhzhia Nuclear Power Plant, which resulted in power outages and the shutdown of the water supply system in some areas. (Full Story)
Interactive Brokers’ Thomas Peterffy sees SPY Bottom Around 3000
Thomas Peterffy, the chairman and founder of Interactive Brokers, thinks the S&P 500 index could decline another 20% from Wednesday's level to bottom at around 3,000. (Full Story)
Israel Rules Out Sending Arms to Ukraine
Israel is rejecting desperate calls from Ukraine to supply advanced air defense systems to counter Russia’s use of Iranian kamikaze drones, intent on maintaining strategic ties between Jerusalem and Moscow. (Full Story)
Putin Declares Martial Law in Various Occupied Regions
President Vladimir Putin announced Wednesday that Russia would impose martial law in the four regions of Ukraine he illegally annexed last month as his military struggles to maintain its grip on territory amid Ukrainian advances. (Full Story)
Chart of the Day: US Stocks vs Bonds Returns 1926-2022
“The sea is dangerous and its storms terrible, but these obstacles have never been sufficient reason to remain ashore” - Ferdinand Magellan
The Coachman's Report - Terms and Conditions